Thanks SQ, and I actually agree with most of what you said. Though, one important distinction I want to point out in what DSS is trying to do. DSS is not claiming that the next five years will look like the last three. It's explicitly not a forecasting model. Instead, it asks a narrower but, I think, underappreciated question: given what actually happened to capital while income was being paid, how forgiving is this assset if the future doesn't improve as hoped? Factors like inflation, valuation compression, and operating recoveries are treated as upside optionality, not as a base case in the model.
And regarding HRL, you are exactly right that the post 2016 period reflects both marginal pressure and p/e compression after a long stretch of exceptional growth. But DSS is not saying that HRL can't recover, it's saying that after nearly a decade of earnings stagnation and capital decline, the dividend alone hasn't been sufficient to carry the investment, so the income case now depends heavily on projections being right.
Anyhow, I appreciate the feedback and thanks for providing guidance and some of the context regarding SSD valuation models (I wasn't aware of that). |
